There was a time when Ethereum shone in the firmament of the crypto-sphere. But since the American election, many investors have seen it as a disappointment. Certainly, the asset has finally crossed the $4,000 mark, but its dominance is crumbling in the face of ever more dynamic altcoins. Between competition from Solana and divisive updates, Ethereum must now reinvent itself to stay relevant in a burgeoning ecosystem.
Ethereum: updates that struggle to convince
With the Dencun update, Ethereum hoped to strike a big blow. Drastically reducing fees on Layer 2 (L2) solutions thanks to the introduction of “ blobs “, this progress above all revealed a dark side to the picture: a drop in revenue for Layer 1 (L1). Result ? The famous burn mechanism, spearhead of the “ultrasound money” argument, takes a hit.
At the same time, Ethereum's market dominance has reached a historic low of 13.1%a level not seen since 2021. Meanwhile, Solana explodes with an impressive growth of 131.7% in 2024, just like smaller projects like Sui and The Open Network (TON).
There decentralization of costs to solutions like Celestia and the rise of app chains, such as Uniswap migrated to Unichain, further weaken the Ethereum ecosystem.
Some numbers to think about:
- 4 million ETH now “bridged” to L2 solutions;
- 28.2% dominance for altcoins, up sharply;
- $512.8 million spent on fees by DeFi platforms in 2024.
A quote from the Binance report sums up the dilemma well:
“ Ethereum navigates multiple competitive arenas at once, between L2, L1, and alt-L1, while needing to preserve value accumulation for ETH. »
ETH price: can it still surprise?
On the price front, ETH seems play bad luck. The post-election dynamic was not enough to revive the massive interest expected by the arrival of Spot ETH ETFs in July 2024. Despite $1.7 billion in net flowsthe trading volume remains timid. Faced with ever more efficient alt-L1s, traders are hesitant to bet big on Ethereum.
THE Pectra upgradeplanned for 2025, could however reshuffle the cards. By focusing on theimproving L2 scalability and user experienceEthereum wants to regain ground.
But the crucial question remains: should the emphasis be on L2 or on preserving the value of L1? A clear answer is required if Ethereum wants to avoid the collapse of its economic model.
In the meantime, analysts note positive annualized inflation for the first time in 2024. News which further tarnishes the image of Ethereum as a deflationary currency. There loss of flagship projects to other ecosystemslike dYdX, doesn't help anything.
Thus, Ethereum faces an uncertain future, shared between technological innovations and loss of economic speed. This context pushes crypto analysts to seriously doubt the possibility of ETH reaching $5,000 this year.
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